Fiat and General Motors announce an alliance
Fiat and General Motors announce an alliance
TURIN (Reuters): Italy's Fiat and the world's top carmaker
General Motors on Monday unveiled an alliance backed with cross-
shareholdings in a bid to keep abreast of the wave of global
consolidation.
The deal, elbowing aside a bid for Italy's industrial dynasty
from DaimlerChrysler, calls for joint ventures in engines and
components and especially targets the markets where both
carmakers operate, Europe and Latin America.
The two carmakers expect to save up to US$2 billion a year
from the alliance.
Under the accord, GM will acquire a 20 percent stake in Fiat
Auto in exchange for $2.4 billion in GM common stock. Fiat will
take a stake of some 5.1 percent in the Detroit giant, becoming
one of its largest single shareholders.
"Automaking today is truly a global affair," GM Chairman and
CEO John Smith told a news conference at the historic Turin
headquarters where Fiat last year celebrated its centenary.
"The challenges are great but the opportunities are almost
timeless and limitless," Smith said.
Fiat Chairman Paolo Fresco told the news conference, beamed
live to GM's headquarters in Detroit, the deal would enable
Fiat's recently loss-making car division to compete better.
"We are offering our shareholders further confirmation of the
fact we want to grow and keep our fate, our destiny, under
control," Fresco said.
Industry sources said the deal hammered out on Sunday night
followed what was effectively an "auction," carried out in secret
over several months and pitting GM against DaimlerChrysler and
BMW, among others.
DaimlerChrysler had offered to buy Fiat Auto outright in
shares and cash. But the Agnelli family, headed by patriarch
Gianni who turned 79 on Sunday, had battled to maintain control
of one of Europe's most prominent family-held empires.
"The two conditions we set were to have as strong an ally as
possible and independence," Agnelli told RAI television.
The deal includes a crucial clause allowing Fiat to sell the
remaining 80 percent of Fiat Auto to GM at "fair market value" by
the end of the decade -- a form of "parachute" offering a way out
if the auto industry flounders. And one which industry sources
said had persuaded the Agnelli family to back GM.